Foundations

Thought leadership on building solid operations

Tuesday, January 30, 2007

Culture Counts

I’ve written a little bit on this in the past, though recent experience causes me to revisit the topic. When working with clients, the part of my introductory presentation at which executives’ eyes inevitably glaze over is when I begin to speak about culture. “Who cares about culture – we need to fix our processes!” is the non-verbal transmission I tend to get from their often puzzled looks.

Culture has everything to do with process performance. It’s the glue that binds people in their pursuit of common goals. Talented people who are bad cultural fits with an organization are more disruptive than productive. Mediocre performers who are overtly aligned with the culture in which they work are worth investing in. The difficult question company leadership must ask and answer with brutal honesty when evaluating employees and their impact on process performance is “Are you with us or not?” If not, politely show them the door.

That said, cultures come in all shapes and sizes, and are popularly and conveniently described as being characterized by collaboration, cultivation, control or competence. To be sure, no single organization will fit neatly into one category, however it is more often than not the case that an organization is demonstrably dominant in one over the others.

A collaboration culture can be described by the terms synergy, equality, unity and involvement. Participants in a collaboration culture are driven by the need for affiliation.

A cultivation culture can be described by the terms growth, development, commitment, creativity, purpose and subjectivity. Participants are driven by a need to realize potential.

A control culture is best described by the terms certainty, systemization, objectivity, stability, standardization and predictability. Participants are driven by the need for power and security.

A competence culture exhibits professionalism, meritocracy, continuous improvement, accuracy and autonomy. Its participants are driven by the need for achievement.

Understanding the dominant culture type of an organization is a critical underpinning of any process improvement initiative. Just as individual motivations need to be understood in order to reinforce good work habits, the culture in which workers operate needs to be understood as it bears significant influence over the means by which they are collectively motivated to fulfill the larger goals of the organization.

Sunday, January 21, 2007

Food Foibles

The deli display case was overstuffed with the day’s bounty, ready for the masses to descend as lunchtime approached: Grilled salmon on focaccia, roasted peppers, gourmet meatloaf – a veritable feast for the eyes. The bread bins, off to the right in the corner, were well-stocked with just about every type of bread and roll you could imagine. My usual request, a tuna on white bread with tomato, wouldn’t do today. The delicacies beckoned, and so I thought I’d go for the grilled chicken breast, beautifully stacked on a plate in the display case, dripping with barbeque sauce. I dutifully took a number from the dispenser and waited impatiently to give the woman behind the counter my order.

“Number six!” came the call, and like some lucky lottery winner I waved my ticket in the air to indicate that I was next. “I’ll have the barbequed chicken breast on a roll with tomato, please,” I declared, mouth watering. “And can you heat up the chicken, please?”

“Excuse me?” asked the woman behind the counter quizzically, a departure from her usual welcoming wave and big smile. “The chicken, here,” I said, motioning toward the stack of chicken breasts labeled $3.99 each. “I’ll have one of those on a poppy seed roll with tomato, please.”

“I don’t think we can do that, sir. Let me ask,” said the woman, heading through the double swinging doors to the kitchen as she spoke, quickly returning with three of her colleagues. “This gentleman here, he wants the chicken breasts, on a roll. Can we do that?” she asked, furrowing her brow as she cocked her head toward her apparent supervisor and the two other counterpersons who had caucused to discuss my lunch. “I don’t think so,” said the supervisor, who then asked me, somewhat incredulously, “What exactly do you want?”

I had the lady behind the counter wrap me up one barbequed chicken cutlet, walked over to the bread bin, grabbed a roll and made my way to the checkout. Total, $4.49.

What’s the process management lesson here?

First off, had they sold me the sandwich in the first place, I would have been out of there in five minutes instead of fifteen. Several workers were sidetracked for several minutes trying to figure out how to placate me but were unable to. Lots of wasted time.

Second, the sandwich would have cost $5.99, which I would have gladly paid. Instead, the store got just $4.49 from me – 25% less than they could have easily realized. Lost revenue.

Third, the woman behind the counter was not properly empowered to make a simple decision, and as a result had to escalate the “issue” to a supervisor who conferred with several other workers who, to the chagrin of others waiting during this busy lunch period, were unable to perform any other work. Bottleneck.

Finally, they failed to satisfy their customer. My needs were secondary to the “rules,” which in this case were unnecessarily constraining, and as such I’ll think twice about going back there. Poor customer service.

Wasted time (i.e., added expense), lost revenue, a process bottleneck and a dissatisfied customer, all the result of a poor process. Multiply that by the number of customers similarly frustrated by similar "issues" during any given day, week, month, year and well, you get the idea.

I headed back to the office, threw the chicken into the microwave in the break room, placed it on the roll, and got back to work. And it was delicious.

Tuesday, January 16, 2007

The Value of Horizontal Expertise

There seems to be an increasing emphasis on the importance of specialists – those people who’ve toiled for years in a particular industry, who know it inside and out, who have deep domain knowledge in some very specific areas of operations. Vertical expertise rules, experts abound. Technological advances only add fuel to the fire, as new applications require ever-greater levels of learning and understanding as they perform increasingly specific functions. In the insurance world, actuaries develop pricing models, underwriters determine who’s insurable, agents drive premium dollars, claims adjusters evaluate losses and all of these functions work together like some megalithic machine, often to the chagrin of the insured. Of course, each “discipline” has its evangelists, and there’s an ongoing fight for dominance, each “expert” convinced that his or her area of expertise is the single most critical link in the insurance value chain. Therein lies the benefit – and challenge – of intensive horizontal expertise; the pieces are best put together through the work of a generalist.

By that I mean someone with a solid enough understanding of the various disciplines that comprise insurance operations (i.e., ”breadth of knowledge”), but a much deeper understanding of (a) how to extract efficiencies from each area of operations; (b) how to manage the lateral organization, or the “white space” on the org chart; and (c) how to get all of those pieces functioning well together. This horizontal expertise is often overlooked, yet it’s the manager who’s charged with these coordinating efforts who is most like the orchestra conductor, a leader reading from a common score that presents the individual parts of the various players that, taken individually, might amount to nothing more than a few sour notes played in odd time.

To be sure, the successful orchestra conductor has almost always mastered at least one instrument and usually has a grasp of – and often the ability to play well – many others. Likewise, the effective executive who assembles and manages groups of individuals engaged in disparate but related functions has often excelled in one area, but understands well all of the working parts of the organization, from sales and marketing, to product development, operations, and administration – not to mention the finer points of motivation, team building and many other “soft” skills.

During his tenure as CEO of GE, Jack Welch was the quintessential generalist. He was masterful in his management of not only the multiple functions that make up an organization, but of multiple lines of business in far-flung regions of the world, from chemicals to jet engines, from television sets to refrigerators, in the Americas, in Europe, in Asia. Welch earned a doctorate in chemical engineering, but his real genius came through when he was given the opportunity to conduct the orchestra. His vertical expertise earned him about $80,000 a year in 2007 dollars; his horizontal expertise made him a billionaire.

Wednesday, January 10, 2007

The Culture Code

I recently read with interest a new book, The Culture Code, by Clotaire Rapaille. Dr. Rapaille, a cultural anthropolgist, is at least partly responsible for several major marketing breakthroughs, helping to rejuvenate struggling product lines with innovative marketing angles. His approach to discovering the tastes of a particular market segment is most unusual. Rather than utilizing the typical “focus group” approach – where samples of prospective consumers review and opine on their experiences with or impressions of a particular product – Rapaille applies some real science. He uses “triune brain theory” – where study participants are led through three one-hour sessions, each dealing with a different “third” of the brain. The first session deals with purely logical impressions, and thus involves the cerebral cortex. Impressions on this level are generally practical, though, according to Dr. Rapaille, not by themselves good predictors of a product’s success. The next hour-long session deals with the emotions attached to the product or service, involving the brain’s limbic system. Impressions using techniques to access this part of the brain are apparently poor predictors as well. Rather, it’s the third part of the brain, the “reptilian” brain, that governs instincts imprinted (usually) at a very young age and provides what Rapaille terms the “code” for a particular product or service. Uncover that code and – voila! – you have the key to marketing a product or service. One example given was the marketing of Jeep in America. Working with a study group, his discovered the “code” for Jeep to Americans was “horse” – as there was a strong instinctive association between Jeeps and riding free in the West. One small modification to the Jeep – changing the square headlights to round (since horses have round eyes) – and product sales soared. Sounds crazy. But 50 of the Fortune 100 rely heavily on this man (and pay him handsomely) to help them to identify the “hot buttons” that drive sales. So, you must be thinking, what does this have to do with business process management?

Rapaille’s approach is simply a sophisticated change management technique. When dealing with consumer products, by unlocking the “code,” product modifications can be made to reflect that code and, more often than not, product sales respond favorably; consumers react (i.e., change their behavior) by purchasing the product. Similarly, since it's incumbent upon anyone undertaking a BPM initiative to foster change among those who are asked to participate, uncovering the key to their baser motivations - the "code" for "selling" a particular change initiative - should prove useful. Why? Years-long work habits (read: imprints) often have to be undone. New technologies have to be mastered. Roles are frequently re-assigned and responsibilities shift as policies have to be re-written to reflect the new approach to work. The central challenge is selling the idea to those who must embrace the new way.

Applying Rapaille’s logic (and experience), one would do well to try to discover the “code” that amplifies process participants’ enthusiasm for embracing change. Traditional approaches to change management range from enticement (“if you do this you’ll be rewarded”) to threat (“if you don’t do this you’ll be fired”). The “three brain” approach of Dr. Rapaille provides a subtlety that eliminates the need to continually escalate change efforts and obviates the need for finesse in understanding those things that truly motivate a workforce.

Where to begin? The logical (“we’ll save money using this approach and you’ll get a bigger bonus”) and emotional arguments (“I know you’re good enough to do this and it’ll be a real feather in your cap when you get it done”) are typical but do often seem to fall short. Perhaps adding a third component, an instinctive one (promoting survival, freedom, connectedness, significance, etc.) is what will ultimately provide the key to consistently successful change initiatives.

Sunday, January 07, 2007

BPM and Root Cause Analysis

Those of you familiar with root cause analysis – one the many tools in the Six Sigma arsenal – know about “4Ms and an E.” The four Ms, Manpower, Machine, Methods and Metrics, and the E – Environment – represent the “bones” on the “fish” when using the principal tool of root cause analysis, the “fishbone” or Ishikawa diagram.

A Traditional Fishbone or Ishikawa Diagram Used for Root Cause Analysis

Rather than be overwhelmed by the many possible sources of error, slowness, cost overruns or other problems in a process, root cause analysis helps us to home in on specific areas of concern by placing possible problems into manageable categories. Each major “bone” of the fish can then be further broken down into more specific categories until, at last, the root cause(s) of a particular problem are discovered.

The design of Perr&Knight’s BPM process context fits nicely into this model, as each of the process influences (see my post from November 7, 2006, The Big Picture for more information) map perfectly with the major bones of the “fish”:

Methods maps to WorkflowMachine maps to SystemsMetrics maps to MetricsManpower maps to PersonnelEnvironment maps to Environment

The last “bone” of the fish in the BPM model, Governance, is simply an additional source to be analyzed.

The Perr&Knight BPM Process Context Mapped to a Root Cause Diagram

To give you an idea of the power of this type of analysis, we can deal with each influence in turn:

Workflow issues can be a result of too many handoffs, too much rework, redundancy, excessive delays or other non-value-adding activities.

Systems may be outdated, non-user-friendly or not integrated.

Metrics may be absent entirely, conflicting, misaligned or not properly communicated.

Naturally, these do not represent an exhaustive list of possible process issues when examining a process. However, by organizing the analysis in this manner, it’s evident that getting to the bottom of the issues most impacting a process is far more structured, and the probability of uncovering the root causes far greater.

Wednesday, January 03, 2007

The Framework Dilemma

Reading the literature on process management and performance improvement, one discovers a plethora of frameworks that purport to be the best known way to approach a process improvement initiative. The rigor of Six Sigma’s ubiquitous Define, Measure, Analyze, Improve, Control framework is complemented by the Define, Measure, Analyze, Design, Validate framework of DFSS (Design for Six Sigma). The good folks at TouchPoint have us traverse a rigorous set of phases called Organization Strategy, Process Architecture, Launch Pad, Understand, Innovate, People, Develop, Implement, Realize Value and Sustainable Performance. [1] The Business Process Management Group has their 8 Omega Framework (Discovery, Analysis, Design, Validate, Integrate, Implement, Control, Improve) and Rummler-Brache has given us Assess, Define, Develop, Deploy and Sustain. Not to be overlooked is the entirely relevant McKinsey 7S framework (Strategy, Structure, Systems, Skills, Shared Values, Staff and Style).

And that’s just a taste! Perr&Knight, of course, offers its own methodology (which I promote heavily) as do countless other consultancies. Is there a best method?

The answer: yes, there is! All of these frameworks have an underlying great grandfather in the work of W. Edwards Deming. His Plan, Do, Check, Act [2] methodology provided the foundation for all of these frameworks. Each new manifestation of this simple idea (we need to first plan, then implement, then evaluate, and then take action based on that evaluation) is the core principle underlying any process improvement initiative. A good BPM practitioner will understand the history – the source of the knowledge and the path of its evolution. History provides a foundation for genuine understanding, and the ability to trace the path of a discipline to its roots is the mark of thoroughness and expertise. Knowing the basic, underlying principles helps cut through the clutter as the critical idea, lost in a cacophony of competing frameworks, leaps out at you, regardless of the specific framework you’re determined to embrace.____________________________________

[1] Their recent book, Business Process Management: Practical Guidelines to Successful Implementations authored by Lead Consultants John Jeston and Johan Nelis is an impressive body of work, and I’d say essential reading for anyone truly interested in BPM.

[2] While Deming is widely credited with the PDCA cycle, he actually called it “PDSA” for Plan, Do, Study, Act. While this came to be known as the “Deming Cycle,” it was actually a derivative of Walter Shewhart’s Plan, Do, See framework from the 1920s.

About Me

Rob Berg is a Principal and Director of Management Consulting for Perr&Knight and editor of the prestigious Journal of Insurance Operations. For the past 15 years, Rob has advised or led senior management teams through major process improvement initiatives and technology implementations. Formerly COO of a major retail marketing firm, Rob built robust operations that supported three consecutive years of triple-digit growth during his tenure.